Is Iran War Deal Imminent? | Macro Mondays: May 25, 2025

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2:05Mikkel Rosenvold:Hello out there. Welcome to Real Vision. Welcome to Macro Mondays. My name is Mikl Rosenwald and together with my usual host, Andres, I'm going to try and unwrap the world of macro and geopolitics. And oh boy, we have a lot to talk about today. We're obviously going to be covering the intense rumors and reports about an upcoming sort of deal on the Strait of Hormuz and the Iran question in general. It's been taking up all attention over the weekend and driving markets here on Monday, so we're going to unwrap that. Then we're going to take a closer look at where we are in the Hormuz-induced inflation wave, what to look out for, what to invest in.

2:47Mikkel Rosenvold:particularly one special thematic that you've been looking into, Andreas, over the past weeks that's been doing very well so far. So stay tuned towards the end of the show for more on that. We also recently released our joint Steno Signals, Andreas. That's usually your weekly editorial. It was this week as well, but I pitched in a little bit about this Iran situation. So if you want a bit more detail and a bit more in-depth coverage, be sure to check out the approach here with Real Vision. It's a little bit expensive, but you get a lot of bang for the buck in there. So go in there and check that out for the full coverage.

3:22Mikkel Rosenvold:This is obviously our free show. We give you a sneak peek into our view and our way of thinking. But to get the full picture, you need the Pro Package. That also includes our Friday articles, which is a portfolio update of the macro portfolio that we run within Real Vision, in addition to lots of shows, insights, and just an overall great community. So make sure to check that out. Andreas, before we jump into the straight-off rhumus, I wanted to say, it's getting really, really hot here in Denmark. We've had the first true summer weekend, in my opinion, and this always leads you to sending me this chart that makes the rounds, that more Europeans die of summer heat than Americans die of guns.

4:04Mikkel Rosenvold:Obviously, in Europe, we're always making fun of, or perhaps not making fun of, but at least criticizing the U.S. gun policy. but just look at this how many Europeans die of heat waves each year which is almost a non-existent phenomenon in the US and the reason is obviously air conditioning how's it going in your loft Andreas it's it's of an older date as well

4:25Andreas Steno Larsen:the reason being air conditioning or rather the lack of air conditioning Mikkel to say yeah yeah that's true so a couple of things Mikkel do you notice something I've shared for the first time that's a sign of the summer as well me too in probably three months but even you've forgotten what we promised our audience here i wouldn't shave until we got a deal around the straight of a moose i was so sure that we got a deal on saturday that i decided to shave because i was fucking i was fucking terrified of carrying that big beard over the uh hot summer here so um yeah i've probably jinxed it again let me just put it like that that michael so i'll allow you to unpack what's ongoing in iran because i i probably We should refrain from saying anything.

5:11Mikkel Rosenvold:Absolutely. Okay, let's dive into that, Andreas. But before that, remember that, just like with Andreas' spirit, our show and our recommendations are sometimes...

5:22Andreas Steno Larsen:Sometimes it may be good, sometimes it may be shit.

5:27Mikkel Rosenvold:Absolutely. Okay, Andreas, let's jump into it, because I feel like in some sorts we've been here before. Almost every weekend we get new dose of hopium. It's tilting a little bit earlier. It used to be Monday morning. Then it came out on Sundays. This week, it was Saturday. Perhaps it was coinciding so that Donald Trump didn't have to go to his son's wedding. I believe that was a Saturday evening. But there was a lot of activity that suggested this is the real deal to some extent, that a lot of politicians were raised to the situation room. Discussions were had. And, you know, what struck me the most over the weekend, Andreas, was obviously the announcement that we were getting close to a memorandum of understanding.

6:09Mikkel Rosenvold:as usual through Barack Ravid of Axios for some reason. He's the go-to guy for this and talks directly with the president. So obviously he has the best first-hand source you can get. This obviously came on top of a week of heavy talks between the US and their Middle Eastern counterparts. First and foremost, we heard reports of a very, very heated and emotional phone call with Benjamin Netanyahu. Netanyahu has been trying to, over the past few weeks, to essentially pitch the idea of restarting the war to Donald Trump, finish the job, that narrative. Donald Trump hasn't bought it this time. I think Netanyahu has lost a lot of leverage because Donald Trump hasn't been satisfied with the results of his previous pitch, which was the entire war against Iran.

6:58Mikkel Rosenvold:So that left the U.S. in a position where they now have to consider, do we take the peace deal or not? And I think what happened on Saturday, I don't know, But I think, Andreas, that Donald Trump tried to test the waters a little bit. I called it a trial balloon. That's probably the best word I have for it. That he tried to leak out that, yes, we have a deal now. It's essentially on Iranian terms. How's that going to fly? And you had a very, very heavy response from the hawk wing of the Republican Party, Lindsey Graham, guys like Roger Wicker here, pushing back very, very tough, very, very heavily against ending the conflict on Iranian terms.

7:39Mikkel Rosenvold:My reading is that this caused Donald Trump to pause a little bit, maybe push back a little bit against the Iranians trying to get slightly better terms. Today, we have this monster of a post. And if you guys don't want to read it, I understand that. I know you don't address it. It's too long for you. But essentially, the GLDR of this is that Donald Trump is now trying to couple these negotiations with the Abraham Accords. So he is, which would be a fantastic result, trying to build Iran into the future security scaffolding of the Middle East, to put it like that. So it's a little bit unclear where the negotiations are right now.

8:18Mikkel Rosenvold:I think the reports we're getting are more hopeful, suggest a shorter timeline than what we've been looking at before. but are we going to get a deal this week? I simply don't know, Andreas. It's very, very hard to tell.

8:32Andreas Steno Larsen:At least it's not ADHD-friendly communication that posts there. No, absolutely not. You could at least split it up into a few paragraphs for us.

8:41Mikkel Rosenvold:Or you could have had an AI summary in the bottom. That's always a great sign that you've written too long. You and I know all about that, Andreas. We like to post long articles. No, kidding aside, Andreas, How has the market reaction been today? And do you think it's warranted from what we know?

8:59Andreas Steno Larsen:So to begin with, I'm actually a little surprised that the market is reacting as much as it is. I mean, we have very strong equity markets. We have oil down between 5 % and 6 % in the one-month future. We'll probably be open with an even bigger drop in the dated oil once we get full confirmation of that. And if you look at interest rates, they're open here in Europe. for once we're actually working here while the Americans are off. We're talking, you know, 10, 12 basis points down on the back of something that, and I mean, maybe we're moving towards something, but we simply don't have the confirmation here.

9:38Andreas Steno Larsen:We'll have to admit to that, right?

9:40Mikkel Rosenvold:And no oil is leaving the straight address. There's no fundamental, changeable news there.

9:48Andreas Steno Larsen:So, Mikkel, again, Again, I've actually spent quite some time today trying to figure out what's going on in the Strait of Amoose because these are the confirmed numbers from Bloomberg and Kepler. So they typically want to be fully sure before they pass on the news of vessels leaving the Strait. But we have news from the Iranian side of them letting vessels through. So maybe they've let ships through via some sort of sneaky passage very close to Iranian territorial waters or something. But at least we cannot see it in any Western confirmed data. Let me just put it like that. So it's basically rumors for now that the Iranians have let vessels through.

10:38Andreas Steno Larsen:I honestly don't buy it, but we'll have to see. we haven't spent our our Memorial Monday watching ships via webcam down there to be honest so in any case Mikkel you're right I mean we basically need some confirmation that we see a positive rate of change here in the Strait of Hamos I think that's essentially the clue of the next days because if the Iranians are truly close to accepting some terms this would probably be the first signs that they're letting you know that they're trying to show some goodwill for it to happen, if you know what I mean. And yeah, as far as I can judge, we don't really have that goodwill.

11:17Andreas Steno Larsen:But they're at least trying to communicate the goodwill now. Spring is here, New York City is bustling, and I just finished a clean of my apartment this past weekend. And boy, did it feel great. You know what also feels great? One dashboard that gets your entire financial life organized. No more clutter, no more mess, no more scattered logins. Just accounts, investments, property, and more, all in one place. Get your first year of Monarch for half off just$50 with promo code REALVISION. Indeed, the Monarch app has helped me visualize my cash flow and helps me see where my money's moving. Not only that, I'm able to view my investments from various camps and how they're stacking up against the S &P 500.

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12:29Mikkel Rosenvold:If you're serious about your future, grab my free report called Prepare for 2030. I think you've got five years to make as much money as possible, and this guide will help you navigate what's coming. The link is in the description. Download it now. I'm still a little worried that we are going to see the usual sort of weekly slide towards misanthropy, throughout the week, lost hope during the week that nothing really happens here. But let's see. At least we have some vibes that things are moving towards a deal. I think Trump tried to test the waters, and that obviously signals that he's trying to test what deal can actually land here.

13:05Mikkel Rosenvold:What can he, I don't want to say get away with because he can get away with whatever he wants, but what's going to be viewed as a decent deal that he can sell as a victory to his population or to the electorate here.

13:17Andreas Steno Larsen:A few things, Mikkel. I promise not to say anything, but I still want to say something on this. It seems to me that a few of the hawks were left out of the situation room on purpose on Saturday, right? Which may be a signal in itself, right? That he's maybe not as willing to listen to Bibi and Lindsey Graham as a couple of months ago. So I've personally held the view that, you know, Trump is one of the very few people with a shorter attention span than me, which is basically what we see now in many ways, that he's keen on ending something here. It takes too long. And I mean, I've had that view geopolitically on Trump for most of his presidency here that he's so eager on getting things done that if you cannot get a good deal within a couple of months, next topic, and then we can return to it again if we get some chance of altering the terms or whatever, right?

14:14Andreas Steno Larsen:But one thing at a time, get something done, move on. That's how a business leader works and operates, right? Yeah.

14:21Mikkel Rosenvold:The only problem was the straight of Hormuz because everything else you could have just left. You say, okay, we have some long-term working group discussion forum on nuclear disarmament, whatever. Nobody would have cared, really. And nobody really cared when he tore up the Obama deal back in 2016 or 2018, he pulled it over. So he could have done that, just accept the straight-up Hormuz thing. And let's see what they get out of it. I don't think they're going to get a much better deal than Obama got in 2015. But I'll cover that in my piece later this week because it's not truly relevant to markets, whether this is a good deal or not.

15:01Mikkel Rosenvold:What's relevant to market is that this will de-risk the situation in the Middle East a lot if this deal happens. It will make the Israelis angry, but again, not too big of a deal for markets. Hopefully, it will ease the pressure on global supply chains. And hopefully, it will ease the pressure on inflation. And that's where I wanted to be heading, Andreas, because we've talked a lot about inflation for the past few weeks. You unpacked a bit more today looking at the US consumer side of things. So again, the big question here, Andreas, is if we get a solution here, does that evaporate the inflation situation or is that enough?

15:43Andreas Steno Larsen:I honestly think it will. So let's start on page 10, Mikkel, because I'm actually usually not in favor of using these inflation X this and this and that charts because obviously inflation is inflation, right? If you measure it somewhere in the economy, you obviously have to include that. But still, if you exclude stuff that is basically derived from the straight of the moves, food and energy to a large extent, right, then I cannot really see that inflation pick up, to be honest. We had some technicalities around the shelter component in the last inflation report. So if you set those three things aside, we're basically moving sideways, maybe even slightly down.

16:25Andreas Steno Larsen:And therefore, Kevin Walsh is now officially the new chairman. I think it's very underappreciated that he takes the opportunity in June to talk about his view on productivity, his view on technology being disinflationary and all of that. And he's got a pretty decent excuse here if we actually have an off ramp for this whole energy situation. Maybe, and I'm speculating now, Walsh has told Trump that, I mean, from what we've seen over the past week, even Trump's loyal lieutenants within the committee have started sounding the alarm around inflation. So Kevin Walsh is under a massive pressure ahead of that meeting in June.

17:05Andreas Steno Larsen:So maybe Walsh has told him, you simply need to provide me with some sort of leeway to talk about inflation in benign terms in June. Otherwise, I'll struggle to come across with a decently benign message to markets. And if there is an off-ramp ahead of that meeting, it will probably be a meeting where they decide upon a wait-and-see approach where, okay, let's see whether inflation comes down once this is resolved. And therefore, we'll just have a neutral stance to everything until we know. And that's been my best guess around central banks for a while. that we're still in this situation where energy markets are actually pretty balanced due to some of the extraordinary measures taken by both China and the US.

17:53Andreas Steno Larsen:And it has sort of bought central banks a few months of time because they're not super keen on hiking into this. But we all know that it's a lot more comfortable to hike into a demand-driven inflation picture rather than a supply-driven demand, sorry, inflation picture. And therefore, as long as you give them something to work with, if you know what I mean. They'll probably kick the can down the road and tell markets that, sure, I mean, we're all able to see the inflation now, but it's still a very isolated inflation picture. And if we can remove the root cause, which is basically the straight-up move still, it may be good enough for us to wait and see.

18:36Andreas Steno Larsen:I'm probably past the point where I think it's feasible to project rate cuts into the second half of the year because what typically happens when you see a big spike in inflation driven by energy and other necessities is that you get second order effects alongside or further down the supply chain after a couple of quarters at the latest. So I think what will happen during the second half of the year is that we'll start to see some consumer inflation in other goods categories. But if you get that inflation alongside energy coming down, you have two factors neutralizing each other, if you know what I mean.

19:16Andreas Steno Larsen:And therefore, my best guess is still that the inflation report for May that is released mid-June will be the peak. But it obviously depends on whether we solve the trade-off moves over the next eight weeks. Because we can keep the energy market in balance for eight weeks, roughly from here, with the extraordinary measures taken by the US and China. But we cannot keep the energy market in balance through the year unless there is some movement in the strait.

19:43Mikkel Rosenvold:Interesting. Okay. And looking into that inflation picture, you posted a great chart on the running beta with the CPI of various sectors. Let's get it on the screen here. So is this the way to play your expected peak in inflation? And what's the timing in these sectors?

20:05Andreas Steno Larsen:Okay, so to begin with, just to explain the chart here, if you have a sector with a positive beta to the CPI, it basically means that the sector performs in equity markets when the inflation is rising, right? And vice versa with those with a negative number. So you have energy at the very top of the leaderboard, and you typically have stuff like technology towards the very bottom of the leaderboard. and everything related to the consumer, basically. This time around, we've had energy and technology working well in tandem, which is very odd, but it's been 100 % spot on our thesis. And why did we get that thesis right?

20:43Andreas Steno Larsen:Well, I have one rule of thumb when it comes to investing. Always buy the stuff that is causing the inflation. So in this case, we basically have three things that are truly inflationary in the basket right now. Energy, food slash fertilizers, and AI hardware. And I want to show a chart on page 14 on how unusual it is to see hardware being such an inflationary force. to give you just before we get to the details of this chart you can just pull it down for a second before i show it um you and i know very well actually when we met each other to begin with you worked in a tv store it's it's long long long while ago but i remember that um and it's one of the things that you've always told me never expect inflation in electronics the price simply goes down in nominal terms, which is true.